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16-09-2024

The fundamentally uncertain economic agent: Brian J. Loasby’s growth of knowledge approach to the psychology of human action

Author: Félix-Fernando Muñoz

Published in: Mind & Society | Issue 1-2/2024

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Abstract

Economists’ conceptions about the “nature of the economic agent” are central to understanding their economic thinking, the phenomena that deserve their attention, the way they build models and theories—as well as the scope and relevance of those theories. Moreover, according to the “psychological” traits of the agent, the subsequent economic theory can accommodate (or not) certain economic phenomena. These claims certainly apply to Brian J. Loasby’s economics. The objective of this article is to survey and analyse Loasby’s reconstruction of economics based on the revision of the psychological foundations of economic agent. We show the influence that George A. Kelly, Adam Smith, Alfred Marshall, Friedrich Hayek and Herbert Simon (among others) play in his work. According to Loasby, concepts such as uncertainty, motivation, imagination, and connecting principles, are central to explaining the growth and organization of knowledge, complexity, and the evolution of economic systems.

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Footnotes
1
An excellent overview of the evolution of behavioural economics is Earl (2022).
 
2
For Gigerenzer (2021: 3548) the axiomatic rationality attached to mainstream agents provides norms only in small worlds (e.g., lotteries) and thus, he proposes “a naturalized version of rationality” for dealing with situations of uncertainty and intractability.
 
3
For example, for establishing stronger foundations for evolutionary economics, Dopfer (2005) proposes the concept of homo sapiens oeconomicus (HSO), an amplified version of homo oeconomicus on a psychological and neurological basis. The main trait of HSO is that it is both a rule maker and a rule user agent. See also Blind and Pyka (2014).
 
4
An example of this strategy is Gallegati and Kirman (2012).
 
5
For biographical see Loasby (1989), Foss (1997) and Cañibano et al (2024).
 
6
How scholars get their ideas because is highly speculative at best and the context of discovery (a la Popper on how people get ideas) is beyond the realm of standard logic.
 
7
I acknowledge the help from one anonymous reviewer that pointed out these six points.
 
8
Shackle’s book provided him with the chance to revisit the two key things from his undergraduate time in Cambridge.
 
9
Loasby takes the idea of reference standards from Pounds (1969).
 
10
What follows summarises Loasby (1999) chapter 1. See also Loasby (2000) (in fact written by 1992).
 
11
Loasby insists that we should not confuse the computational capacity of human beings with the possibility of sensible behaviour. This limitation on human capacity is particularly important when we refer to the scarce resource of attention.
 
12
Loasby repeats these phrases in other works, for example Loasby (1991: 2). Clearly them detach Loasby from nihilism.
 
13
Loasby (2004) is very critical of Simon’s bounded rationality. But in his opinion, if well analysed, it opens the way to intelligent behaviour in contexts of uncertainty.
 
14
We elaborate on Loasby (2007a). To our knowledge, the term “connecting principles” appears in Loasby (1991) for the first time, and afterward, it is referred to in most of his contributions.
 
15
What Smith says about how people “marvel” at things they cannot understand seems to be part of his aesthetics as well as his view of motivation. “Surprise and delight” play a key role in successful product development and marketing—where firms anticipate what may appeal to customers in its cleverness and functionality that the customers had not thought of. This topic might be related to Loasby’s contributions on consumers and new products (see, for example, Loasby 1998).
 
16
According to Loasby, Kelly unconsciously echoes Robertson’s (1951) complaint about the long struggle to purify consumer theory from psychological or metaphysical concepts, a task initiated by Pareto (in fact by Maffeo Pantaleoni) and completed by Hicks, Allen, and Samuelson (see Bruni 2010).
 
17
“The blueprint of human progress has been given the label of ‘science’”. Thus, “when we speak of man-the-scientist we do not speak of the scientists, but of all men. What it would mean to construe man in his scientist-like aspect” (Kelly 1963: 4).
 
18
According to Kelly’s Organization Corollary, each person characteristically evolves, for his convenience in anticipating events, a construction system embracing ordinal relationships between constructs—or systems.
 
19
Remember that there is no systematic account of this “reconstruction” as such in any single work. Earl (1990: 644), reviewing Loasby (1989), suggests that he wishes Loasby “would turn from being a superb critic and begin instead to set out in detail his thoughts on which problems should occupy the attention of economists and how they should go about tackling them”.
 
20
To explain human actions, both successful and unsuccessful, we often need to understand the representations on which they are based. Representations may cause problems that are the product of the form of representation that is used. For example, framing effects may appear.
 
21
For Earl (2003) the entrepreneur may be recast by synthesizing ideas from personal construct psychology (Kelly) and systems-based evolutionary economics. Loasby (2007a) relates entrepreneurship to his theory of the human mind.
 
22
For a combinatorial Austrian theory of capital see Endres and Harper (2019). For an interpretation of Schumpeter’s entrepreneurship, see Loasby (2007a: 31) where he claims that the “combination of imagination, skill and motivation defines the Schumpeterian entrepreneur”.
 
23
For example, “[t]he mere possession of a range of technological capabilities does not guarantee success in creating new products […], for someone must first notice the potential connections and overcome any barriers to making them happen” (Earl 2003: 123).
 
24
For example, increasing returns may be a consequence of changes in the organisation that give rise to a cumulative process “in which new knowledge stimulated extensive rearrangement of organizational boundaries, which redefined the context for generating further knowledge, leading to further restructuring (Loasby 2007a: 44).
 
25
For many, Loasby has always been a heterodox but absolutely undogmatic thinker. In an interview he gave to Nicolai Foss (1997), he states this very clearly: “I have never been able to question very much at a time, I think. I got a note somewhere of something that G.K. Chesterton once said that a man must be orthodox on most things, or he will never have time able to practice his own particular heresy.”.
 
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Metadata
Title
The fundamentally uncertain economic agent: Brian J. Loasby’s growth of knowledge approach to the psychology of human action
Author
Félix-Fernando Muñoz
Publication date
16-09-2024
Publisher
Springer Berlin Heidelberg
Published in
Mind & Society / Issue 1-2/2024
Print ISSN: 1593-7879
Electronic ISSN: 1860-1839
DOI
https://doi.org/10.1007/s11299-024-00310-z